Sears Posts Lower Profits, Flat Sales

Hoffman Estates, Ill. - Sears reported lower net income and flat
sales for its fiscal first quarter ended May 1.

Net income for the quarter of $16
million compared with $26 million year on year. Revenues during the quarter
were $10.1 billion, essentially flat with the prior year's opening quarter.

Comp store sales at Kmart were up
1.7 percent and 1.2 percent at Sears Domestic.

"Kmart registered a comparable
store sales increase for the third consecutive quarter and Sears posted its
first quarterly increase in several years as we effectively partnered with
state agencies to sell energy-efficient appliances. Sears, however, also
experienced lower margin rates during the quarter," said W. Bruce Johnson,
Sears Holdings' interim CEO/president.

"On the other hand, our Kmart
format performed very well during the quarter, achieving margin rate
improvement on top of its increase in sales and nearly doubling its Adjusted
EBITDA. Furthermore, we continued to increase our investment in our
multi-channel capabilities and ShopYourWay rewards program, while at the same
time reducing our expenses."

The domestic comparable store
sales results included an increase at Kmart of 1.7 percent and an increase at
Sears Domestic of 1.2 percent. Increases in sales for thequarter at Sears
Domestic were primarily driven by the home appliance category, partially offset
by declines in the tools and home electronics categories.